7 October 2008
Nairobi — Development projects funded by private capital inflows in the continent risk being postponed due to the financial crisis that is being experienced in the United States.
According to World Bank chief economist for Africa Shanta Deverajan, projects financed by these inflows stand delayed in the coming days.
"The last five years has seen the continent benefit a lot form private capital flow, but in view of the crisis facing the U.S economy and now spreading to Europe, the inflow stands to be postponed," said Mr Deverajan.
The economy of the United States has received a beating over the last one-month sending panic to other economies in the world. Leading stock markets have continued to be bearish despite a USD700 billion bail out by the US government.
The cut back on private capital, Mr Deverajan added would dampen the prices of securities in some African countries. By 2007, private capital to the continent from amounts to about USD50 billion. This spans loans, portfolio investments and foreign direct investments.
"Most countries were using these inflows to finance much-needed infrastructure investment, which may have to be postponed. If the cutback spreads to official development assistance, the lives of hundreds of millions of Africans, including the two million on AIDS treatment, may be threatened," he added.
Planned Eurobonds by Kenya and Tanzania also stand affected by continued crisis in the global financial market. Kenya was to raise Sh35 billion through the bond to finance various infrastructural programs in the country.
Other centres of African economics like remittance by the Diaspora are also expected to be affected by the slump being experienced in the west.
Mr Deverajan was addressing journalist across the continent in a videoconference organised by the bank ahead of its annual meeting. The meeting is expected to address among other things the crisis and its impacts to the rest of the world.
Kenyan delegation at the meeting is headed by acting Finance Minister John Michuki. They are expected to pitch for the support the country needs from the bank as well as be part of the preparation of the banks systems and structure for support.
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